Posts Tagged ‘Incorporate’

Comparing Business Structures

Thursday, March 24th, 2011

One of the most difficult steps in the start-up process is deciding which business structure fits your business idea best. There aren’t that many options, but the distinctions between the types of entities can be overwhelming. A lawyer can help you make the decision but with a little research, you may be able to choose yourself. Here are some pros and cons of the major business structures you can choose from.

Sole Proprietorship. A sole proprietorship is the default business structure if you don’t file anything with the Secretary of State. This isn’t always the best choice for everyone, as it can result in a higher frequency of audits and it doesn’t provide protection for your personal assets and you can be personally liable for business debts. However, it is simpler to get started and the profits or losses can be reported on your personal tax return, without filing separately.

Limited Partnership. A limited partnership offers protection for the personal assets of the limited partners, however the partners who are actively involved in management do not have any protection. This is a nice option for many companies that focus on investing in real estate as it allows money to be raised for the business without involving outside people in the management of the business. This type of structure requires a filing with the Secretary of State.

Limited Liability Company (LLC). The Limited Liability Company, commonly known as an LLC, is one of the most popular entity structures among businesses right now. It’s a relatively new structure that combines the benefits of the corporation structures but eliminates some of the negative aspects. Specifically, the LLC protects everyone in the company from personal liability for business debts and allows losses to be “passed-through” to the people involved in the company. This “pass-through” option is a huge benefit to the LLC because it means that the people involved in the company can claim the losses of the company on their personal tax returns. In an LLC, you can take on passive investors to raise financing and corporation maintenance is fairly easy.

C-Corporation. A C-Corporation is the most general type of corporation you can have. The owners of a C-Corporation are mostly protected from personal liability for business debts, although if the corporation doesn’t follow the formalities of a corporation, there can be problems with personal liability. As a result, the formalities such as filing annual reports, maintaining separate bank accounts, keeping track of meeting minutes, and holding shareholders meetings are very important. A benefit of operation a C-Corporation is that the owners can share corporate profits with the corporation, lowering the overall tax rate. A C-Corporation can also have unlimited number of shareholders. A third benefit of C-Corporations is that if you wish to take your company public (selling shares over a public trade, i.e. NASDAQ or NYSE), you will need to be in a C-Corporation so starting out that way saves trouble down the road.

S-Corporation. An S-Corporation is a C-Corporation that has specially elected to be treated as an S-Corporation. It has the same personal liabilities protections and potential issues although it has significantly more stringent formalities. An S-Corporation can only have a certain amount of shareholders and the shareholders must meet specific requirements. An S-Corporation also allows for corporate profit sharing, but the allocations must be done in accordance with the shares each owner owns. A benefit is that owners can use any losses of the corporation on their personal income tax returns, reducing personal tax liability in many instances.

Another thing to consider when choosing a business structure is that your state may have some restrictions regarding the types of businesses that can operate in each structure. The Secretary of State for your state may be able to provide some guidance about this or an online filing service can as well while they’re filing your paperwork, if you choose to use them.

As you can see, there are numerous advantages and disadvantages to each type of business structure. Depending on the type of business you are starting, some of these disadvantages may not affect you as much as others. The only thing is to make sure that the business structure works best for you, and you are familiar with the applicable requirements. Let MyCorporation help you get started! Learn more HERE!

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Financing Made Simple

Monday, March 14th, 2011

Financing a start up is daunting for many entrepreneurs. While hunting for cash, many find themselves sucked into flashy gimmicks promising “Free Money!” and “Fast Cash Now!” from websites and hiring consultants. Unfortunately, most of these promises are empty, leaving many small business owners searching for cash.

As difficult as it may seem, small business funding is available. For qualifying businesses, there really are opportunities to land free money from state, county and city governments, as well as private foundations and corporations.

Technology startups traditionally have the best chance of getting grant funding, often through the federal government’s Small Business Innovation Research (SBIR) or Small Business Technology Transfer (STTR) programs. These programs are lucrative, awarding more than $2 billion each year, but both require a tight match with exacting requirements.

Finding grant money for non-tech businesses is a little tougher. The first step: Figure out if you qualify for any special small business certifications. Some of these special certifications include women or veteran owned businesses. Federal and state governments sometimes give priority for grants to these types of business owners.

Utilize the internet to connect with your local government. Check their websites to find the economic development agency or equivalent in your area. These agencies often offer government sponsored grants in an effort to attract new businesses. Grants are also offered in order to encourage business owners to make their business economically friendly. Unfortunately, in the current economic state, government funding is difficult to secure. However, patients and perseverance can pay off.
Another way to generate cash flow is to find partners or investors. Finding a few partners and/or investors that share your interests and you get along with can be the key to successful financing. Not only do partners and investors give money, finding a couple of partners or investors can make you money in two other ways. First, they involve themselves in the business and have a vested interest in the business doing well. They may bring other types of experience to the business and this is helpful for getting your start-up going in the best possible direction. The second way partners or investors help make the company money is that many other financing entities (including banks, grants, trade associations, and venture capitalists) feel more comfortable giving money to a business that has partners and investors. Getting involved with trade associations that apply to you, attending conferences that invite people who share your interests or expertise, and subscribing to industry journals are three great ways to finding compatible partners and/or investors.

Thankfully, the economy is improving. Credit is coming back to midsize and larger companies faster than small businesses. That’s because small businesses are riskier. Small businesses should benefit from general economic conditions improving and, as that happens, lenders should feel comfortable taking on more risk and making more small-business loans.

Learn more about financing your small business HERE!

Take Your Business to the Next Level: Apply for a Trademark!

Thursday, March 10th, 2011

After starting your business and establishing your initial customers to reach out to, it may seem like there isn’t much to do except wait for the customers to come rolling in. On the contrary, this is the perfect time to start your business down the course for success! One of the most important (and easiest) ways to do this is to register for a trademark for you business name, product name, logo, or company slogan. In comparison to the number of people who open up businesses each year, not many people take advantage of this step but it can really save you in the end. The benefits of registering a trademark for your company name and/or product are twofold: protection of your business and brand recognition.

First, trademark registration provides protection to the company you have worked so hard to create. All the time and energy spent making sure that you are the best can be wasted if a similarly named company moves into your neighborhood and starts operating poorly. Consumers may then start confusing your company with theirs which is great for them, bad for you. Registering a trademark protects you from this scenario by deterring other entrepreneurs from using your company name and also provides a method of legal recourse for those situations when another company starts using your name anyway.

The second benefit of registering a trademark is to promote brand recognition. If you think of all the products and company names you encounter every day, many of those products are registered trademarks. “Branding” is vital to a company, especially for advertising and consumer recognition. Registered trademarks provide a national, and even sometimes international, license for use of your company and/or product name. This allows for uniform advertising on a national level that promotes name recognition anywhere you advertise. Consumers from California to New York that search for your product online or hear about your company will associate that name with your company only; a very valuable tool for increasing your company’s business.

After you’ve worked to bring your business idea to life, protecting it becomes important. One way to do that is through the use of trademarks. Companies with similar names or offering similar products can steal customers away or negatively impact your reputation. Registering your business name and product protects against this scenario and allows you to be a unique company, saving you from consumer confusion and promoting your brand wherever you want to operate.

Ready to apply for a trademark? Let MyCorporation help! Learn more HERE.

Small Business Trends in the Month of March

Thursday, March 3rd, 2011

Welcome to March, the month of… nothing really. The year always starts out with so much promise, so much enthusiasm! Then fast forward three months and you’re missing the holidays already and summer just can’t come fast enough. In case this has been your attitude lately, cheer up! The truth is that the economy is looking better and better as the days pass and consumer spending is increasing as a result. This means that businesses of all kinds are finding themselves with more customers and more profit. Many businesses aren’t necessarily feeling the improvements yet but 2011 is predicted to be one step further on the road to economic recovery. Here are some forecasts that economists and analysts alike are making about the economy and finances in 2011. Also included are some tips on how to make the improvements we are seeing work for you.

1. Credit is Becoming More Accessible. One of the biggest improvements in the economy for small businesses has been the increasing availability of credit to business owners. The National Federation of Independent Business recently published a report on small business economic trends stating that 92% of small business owners surveyed said that their credit needs were met or they weren’t seeking credit. Another report by the National Federation of Independent Business said that 60% of businesses that sought credit last year received all or most of what they asked for. The most cited reasons for a business not getting the credit it wanted was when the business wanted to “prop-up cash flows” or when the credit application listed a variety of uses for the money. One of the ways to avoid this problem and get the credit you’re seeking is to make a specific plan for the use of the loan money and clearly convey that to the loan officers without making it seem like you just need the money because your profit is down in this economy. Banks are unwilling to loan money to a business that isn’t putting the money towards making more money because loaning money to pay off back loans is only a temporary fix. Another way to improve your chances of being approved for credit is have your financial books audited by a certified public accountant. Finances that have been scrutinized are more appealing to banks offering loans because it alleviates some of the fears the bank has about the viability of the business.
*Aside from credit: venture capitalists are behind more initial public offerings this year than they have been since 2000, indicating an increasing willingness to financially support small businesses.

2. More People are Getting Jobs. The unemployment rate hasn’t shifted this year as much as expected but there are indications that more small businesses than not are looking to hire sometime this year, although this may come towards the end of the year. In addition, people are still going in to business for themselves, increasing the opportunities for people to find work, both as business owners and as employees. Women and minorities are especially taking advantage of this shift in the economic structure to go into business for themselves, although senior citizens and veterans are close behind. The best thing about these groups of people creating their own businesses is that the members of the groups aren’t necessarily centered around youth. In fact, many of the new business owners in today’s world are actually experienced professionals in a variety of fields. This tends to make the businesses more stable from the start and to offer more potential for the business to be enduring and successful. Marketing yourself for a new job under any economic conditions has a lot to do with persistence, but there are some new trends in the field of employment to work with as well. One big thing is that more and more, hiring businesses are looking at your past-work experiences and internet “footprint.” The increasing use of technology in the work place has made it a lot easier for a future boss to contact your previous bosses and fellow employees, as well as check you out on social networking sites such as LinkedIn or Facebook. Fully disclosing any prior work problems can really help your future boss prepare for speaking with an old boss, plus it gives you an opportunity to shade any negative information in the best possible light for yourself. In addition, carefully monitoring any social network sites you belong to is key to managing your online image, especially with future employers in mind.

While it’s nowhere near as bad as it was a few years ago, the road to recovery and boom is long and difficult. Hopefully these two tips have brightened up your outlook for 2011 and given you some good ideas to turn an average situation into a great one! Remember, there are always ways to improve your business, many of them are inexpensive or even free. Building a customer base and marketing yourself appropriately are key ways to handle any downturns your business may face, don’t let yourself be discouraged! Just come up with a new tactic!

Five Ways to Keep Your Business Out of Court

Monday, February 28th, 2011

Starting a business is fun and exciting for most entrepreneurs. However this feeling of euphoria will quickly retreat if your business is sued. The court room is the obvious enemy of the small business owner. However, fear not! By following these five simple rules you can avoid facing the courtroom so you can focus on the success of your business.

1. Be very cognizant of your business image. Owners and employees should avoid making any public announcements or conducting any business that might be considered questionable. Avoid things such as making slanderous statements or having unnecessary contact with customers. This includes limiting possible conflicts of interest. Situations such as these can damage the integrity of your business and land you in legal turmoil. To avoid legal action, do the job your business was created to do in a professional and neutral manner.

2. Hire a competent attorney. While not always necessary, business owners should have a ready legal contact in the event the business is sued. Business owners should attempt to secure an attorney that is familiar with local laws and customs and the type of business in which you engage. Finding an attorney is simple with resources such as the yellow pages and Google. Even if your business is never sued, many business owners need different forms of legal advice. Securing competent counsel is a good idea.

3. Separate yourself from your business. This can be achieved by incorporating your business. Operating your business as a sole proprietorship leaves the owner’s individual assets open to attack by creditors. Incorporating your business separates your company’s finances from your own. Make sure that you do not mix personal and business expenses. Do not pay for business related expenses out of a personal checking account. Create a business account that is used solely for your company. This will clearly define the line between you and your business.

4. Insure yourself. All businesses should obtain liability insurance in the event that, if you own a retail business, a customer was to slip and fall in your place of business. In addition to purchasing insurance, another way to insure yourself against liability is to build protection into your contracts. If an act of nature, a specific supplier or some other uncontrollable act can make it impossible for you to fulfill a contract (and thus open yourself up to legal action) then you should be putting to ink that you are not liable for incomplete work due to these factors. Discussing the possible clauses and legal phrases needed in your work contracts is one of the best ways to employ your lawyer’s time and it will reduce your need for a lawyer later on in your business venture.

5. Protect your business files. First, make sure that your business has updated antivirus and other types of security software loaded and activated on their systems. If a computer system were to go down because of a virus, the business may be at risk of not being able to perform certain contracted work. Also make sure that you keep record of email communication with your customers. In the event of a lawsuit, it is often your customer’s word versus your own. Recording communication will provide all the evidence necessary to defend your business.

Separating your assets from that of your business is crucial. Retaining competent legal counsel, protecting your business files and communication as well as insuring your business will hopefully keep your business out of the court room for good! Learn more about ways to maintain your business, or how to incorporate HERE!